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Economic reality sinks in for autonomous car biz

There's what is possible, which is always exciting, and there's what will make sufficient money (especially at current levels of investment), which sadly is bound to more mundane and generally non-technical constraints. Auto makers are starting to hedge their bets on this direction in part through partnerships to spread risk. They still believe in the market but now seem to believe enthusiasm has outpaced likely return.

FRANKFURT/DETROIT (Reuters) - BMW and Daimler, the world's top luxury carmakers, have announced alliances with suppliers, talking up the virtues of having a bigger pool of engineers to develop a self-driving car. But another motive behind these deals, executives and industry experts told Reuters, is a concern that robocars may not live up to the profit expectations that drove an initial investment rush. Carmakers are increasingly looking to forego outright ownership of future autonomous driving systems in favor of spreading the investment burden and risk.

The trend represents a clear shift in strategy from little more than a year ago when most automakers were pursuing standalone strategies focused on tackling the engineering challenge of developing a self-driving car, rather than on the business case. "Although it is a substantial market, it may not be worth the scale of investments currently being sunk into it," said a board member at one of the German carmakers, who declined to be identified because the matter is confidential.

Well that's the job of PR people, to put a positive spin on things. Not sure it's the job of Reuters to blindly parrot this...

We all know what's ACTUALLY going on here. Turns out that modern computing is HARD and not a skill with which BMW, Daimler etc are especially endowed. These are the guys that, a year ago, thought it was a sensible option to create their own app stores for their cars because, isn't that what computer companies do? Regardless of whether this makes sense in UI terms, how to handle security, what's the long-term upgrades plan, etc etc.

They are in basically the same position as the telcos were, back in the days when those companies had the bizarre fantasy that people actually were willing to pay crazy high prices for crappy map data, lousy payment systems, baroque contact management, and the other crapware that ATT, VZW etc were trying to force on you. And, like the telcos, the gap between the car company's compute competence and what the serious kids are capable of has become so obvious that even a CEO can't ignore it any longer. If they had any sense, they'd accept the structure of the future and start making deals with Apple, Google, Uber today to act as contract manufacturers for their cars, rather than waiting till the Silicon Valley companies contract it all out to China.

Well that's the job of PR people, to put a positive spin on things. Not sure it's the job of Reuters to blindly parrot this...

We all know what's ACTUALLY going on here. Turns out that modern computing is HARD and not a skill with which BMW, Daimler etc are especially endowed. These are the guys that, a year ago, thought it was a sensible option to create their own app stores for their cars because, isn't that what computer companies do? Regardless of whether this makes sense in UI terms, how to handle security, what's the long-term upgrades plan, etc etc.

They are in basically the same position as the telcos were, back in the days when those companies had the bizarre fantasy that people actually were willing to pay crazy high prices for crappy map data, lousy payment systems, baroque contact management, and the other crapware that ATT, VZW etc were trying to force on you. And, like the telcos, the gap between the car company's compute competence and what the serious kids are capable of has become so obvious that even a CEO can't ignore it any longer. If they had any sense, they'd accept the structure of the future and start making deals with Apple, Google, Uber today to act as contract manufacturers for their cars, rather than waiting till the Silicon Valley companies contract it all out to China.

Problem is the MBA's running these auto companies learned in business school that they need to be differentiated platform companies, marketing is king, and that manufacturing is for schmucks. (Related note: Every MBA finance guy I talk to about TSMC thinks "it's a manufacturing business can't be any good, plus look at all that capex". Their loss.)